Community Banker of the Year: Glacier Bancorp's Mick Blodnick
Glacier Bancorp (GBCI) in Kalispell, Mont., has agreed to buy First National Bank of the Rockies in Grand Junction, Colo.May 8
Glacier Bancorp in Kalispell, Mont., has agreed to buy Montana Community Banks Inc. in Ronan, Mont.November 5
After 25 bank deals in as many years at Glacier Bancorp, Mick Blodnick knows how to do acquisitions how to pick them, how to make them work after the ink is dry.
And not only for his institution but for the other side of the table as well.
"I look back at these 20-plus transactions and there's not a one that I regret doing," he said. "And hopefully, there's not one that any of those sellers regret doing with us."
Blodnick, who been chief executive of the Kalispell, Mont., company since 1998, attributes much of Glacier's success to the banks he's bought. Glacier operates its 13 bank franchises under an unusual business model that gives local management teams many of them bankers who stayed on after selling to Glacier a lot of autonomy.
"We have had great people and great talent in this company, and you'd never be able to do what we've done without that kind of commitment," he said. "Every time we've added a bank it just seemed like they instantly drank the Kool-Aid."
Glacier's two and a half decades of M&A, along with cautious leadership that has allowed the bank to sail intact over successive waves of crisis, have helped it grow from a small savings-and-loan to the largest bank in Montana, with $8.1 billion in assets.
The steady climb has rewarded investors, as well as the banks that have joined up along the way. Since going public in 1984, Glacier has made 25 deals and its stock price has risen more than 8,500%.
The stock has doubled over the past five years, despite slipping more than 10% from its all-time high at the end of 2013 (a peak it had reached with the help of short-term accounting benefits).
Blodnick's disciplined pursuit of acquisitions and efficient management of a complex business model have earned him a spot as one of American Banker's three community bankers of the year. (The other two are Trevor Burgess of C1 Financial and Chris Bauer of Anchor Bancorp.)
Glacier has had a typically solid year in 2014, earning $84.7 million in the first nine months, for a return on average equity of 11.27%.
Also typically, for an institution that has averaged a deal a year for the past quarter-century, Glacier announced two acquisitions. It bought First National Bank of the Rockies in Colorado and has a deal pending for Community Banks, Inc., in Montana.
What wasn't typical about this year is that after 37 years with the bank, including 17 as CEO, Blodnick began the process of turning it over to the next generation of bankers. Glacier announced in October that it has hired a search firm to pick its next CEO, though Blodnick, who's 61, plans to stay on as long as necessary probably a year or two to help the next CEO get settled.
"I've dedicated my entire life to this company, and I want to make sure that this transition is absolutely as smooth and seamless as possible," he said.
Blodnick's years in charge have been marked by discipline and stability. Glacier hasn't chased short-term revenue trends, gone crazy with high-risk, high-yield loans, or made big, risky deals that didn't pay off.
These traits mark Blodnick's personal life, too. A lifelong Montanan, he still lives in the house he and his wife, Kim, bought 35 years ago, and where they raised their two children, Beth and Freddie.
Blodnick doesn't have many outside interests that distract from his work at the bank; "I'm not an avid this or an avid that," he said. He hardly travels, doesn't play golf, doesn't hunt, fish or ski.
"I could never figure out how to run a company of this structure and this size without totally immersing myself," he said.
Looking back on his career, "I didn't have a lot of hobbies; this was my life," he said.
Blodnick said he has never considered leaving Glacier. "I got calls in the past, but they were always very short conversations," he said. Other workers tend to stay for the long haul, too. Blodnick is the longest-tenured employee in Glacier's history, but several others like his assistant of 33 years, LeeAnn Wardinsky have been there nearly as long.
Along with this stability, Glacier has benefited from smart big-picture choices over the years, like leaving behind its thrift charter to buy banks during the S&L boom; putting together a decentralized banking model appropriate for its geography; and raising capital from private investors during the last crisis rather than accepting government aid.
The bank's conservatism stood out in the downturn, particularly compared with similarly sized lenders in the Northwest, like Sterling Financial and AmericanWest, which had to be recapitalized and eventually sold.
Glacier's management saw real-estate prices getting frothy and wanted to raise capital ahead of a market correction, so it planned an offering for the fall of 2008. The industry started imploding, with banks lining up to take Troubled Asset Relief Program funds, right as Blodnick was getting ready for a roadshow.
Glacier's leadership was leery of taking federal money, and decided to go through with the planned raise from private investors.
"Call it clairvoyance, or call it sheer luck," Blodnick said.
That capital cushion kept the bank safe through the crisis. It bought securities to support earnings while its bad loans ran off, and then raised capital again in 2010, hoping to buy failed banks. When the wave of failures never arrived in its backyard, Glacier began deploying its excess capital on smaller open-bank acquisitions.
When asked about the decisions he's gotten right throughout his career, Blodnick instead focuses on his missteps. Even though Glacier avoided the worst of the real-estate bubble, it did make plenty of loans backed by raw land, which "came back to spank us," he said.
"We should have known better. I blame myself for that," he said.
Analysts say that this forthrightness has, over the years, helped give Glacier credibility among investors. "He tells you how he sees things and how he plans to approach them, and I think even if they disagree, over time investors appreciate that," says Tim Coffey, a FIG Partners analyst.
Glacier has a reputation for conservative even overcautious loss provisioning, which helps smooth out earnings despite Montana's highly seasonal and weather-dependent economy.
Blodnick has also earned investors' appreciation and sometimes their puzzlement by his distaste for lavish pay. He said he preferred to receive lower pay than CEOs of comparably sized banks, even when Glacier was among the highest performers in its group.
"No other CEOs want to use Glacier in their peer group, because I certainly screw the averages up," he said with a laugh.
Why the preference for lower pay? When some of Glacier's franchises had bad years and could not pay bonuses or give raises, he didn't think it was appropriate for him to take a raise either, even if the company as a whole performed well.
"We've always run a tight ship, and I always thought that should start with me," he said. "I felt that I was always being treated fairly and I didn't have a lifestyle that needed that kind of compensation."
Everit Sliter, who was a Glacier director from 1973 until this past April, stressed that this was Blodnick's decision. "We used to almost have to fight with him to get him to take a raise," he said.
That began to change in 2011, after a consultant hired by the board's compensation committee found that the bank's executive pay was in the bottom quarter of its peer group, even though its performance was in the top third. The board has been gradually raising executive salaries and plans to reach the peer-group median by 2016.
Blodnick's preference for modest pay is a reflection of his upbringing, he said. He grew up in Anaconda, Mont., a former mining town that's now best known for the Anaconda Smelter Stack, a nearly 600-foot-tall brick chimney often pictured on souvenir postcards from the region. It was built for the Anaconda Copper smelter, a huge facility that was the center of the town's economy for a century. The smelter was demolished in 1981, and the smokestack is now part of a national park.
When Blodnick was growing up, Anaconda was still a strong union and mining town. His father and both his grandfathers worked in the smelter. Every couple of years his dad got "an unpaid vacation" when mine workers went on strike, and these were not easy times for a family with six children, Blodnick said.
His parents lost their house when he was in fourth grade, and from then on his family lived in public housing. They were poor, but no worse off than others in Anaconda, he said.
"We lived in a housing project, and that was fine, because in Anaconda pretty much everybody's parents worked up at the smelter and we were all kind of in the same boat," he said. "None of us knew the difference."
After high school he went to the University of Montana, where he studied sociology, with a focus on criminology, and thought about joining the Federal Bureau of Investigation after graduating.
Instead, he found work in Kalispell as a director with Head Start, a federal program that offers early-childhood education to children from poor families. He liked the job and the families he worked with, but after two years he wanted to move on. He spent a summer helping build a house for the husband of an employee of a local thrift, who suggested he apply for a job there.
In 1978, Blodnick started as a line teller at First Federal Savings and Loan, which would eventually become Glacier. He soon got involved in all facets of the business, from operations to marketing to lending.
"We were a smaller bank back then, and I was exposed to just about every aspect of the operation," he said. He had a knack for managing investments, and eventually was put in charge of the bank's securities portfolio.
Like other savings-and-loans, First Federal took advantage of deregulation in the early 1980s to start acting more like a commercial bank. In 1984, Blodnick worked closely with John MacMillan, who would later become CEO, on First Federal's conversion to a public thrift.
But also like other savings-and-loans, First Savings found itself getting deeper in trouble as the 1980s wore on.
"We were sitting there with short-term money and long-term assets," said Sliter. "We were on the way down the tubes."
Blodnick and MacMillan helped restructure the balance sheet and attract new capital. The bank survived, and, with new cash, managed to become one of the first thrifts to buy a bank. It acquired Glacier National Bank in 1989 and took its name a few years later.
This was the bank's first merger. Glacier then made a handful of deals in the 1990s before a pair of high-profile acquisitions brought it regional, then national, attention.
The first was the 1996 purchase of First Security Bank of Missoula. First Security was headed by Bill Bouchee, a well-respected banker throughout the state. Bouchee's decision to join up with Glacier gave the bank credibility.
"I think there were a lot of other bankers in Montana who looked at that transaction and said, If Bill Bouchee is joining forces with them, maybe they're somebody that we ought to talk to, too,'" said Blodnick.
When MacMillan stepped down as CEO in 1998, Blodnick, who had been his right-hand man, was the clear choice to replace him, Sliter said. Glacier converted to a commercial banking charter that year, and in 2000, Blodnick landed a transformational deal, buying WesterFed Financial Corp. in Missoula, which doubled Glacier's asset size to $2 billion.
That deal brought Glacier attention, and made it easier to raise money from institutional investors. It also helped vindicate Glacier unusual structure as a collection of semi-autonomous community banks, which had been a tough sell, particularly when Glacier was still a thrift.
"Convincing hardcore bankers to join up with a savings-and-loan took some doing," said Sliter.
Yet the basic idea of the model, which Blodnick calls a "family of banks," is straightforward and, given the ever-growing compliance burden, increasingly attractive.
"The vision was to provide independent banks with resources for investments and computer systems and human resources and internal auditing all the things that cause small banks grief," Sliter said.
Many of the banks Glacier bought continued to operate with separate management teams (and, until recently, separate boards of directors), but with centralized operations and back-office functions. Loan decisions are made locally, while Glacier handles compliance. Glacier's back-office has traditionally been very streamlined, and the bank's efficiency ratio was 55% through September. That compares favorably with an average of 62.2% for all banks between $1 billion and $10 billion in assets, according to the FDIC
The model makes sense in Glacier's primarily rural footprint across six Western states, where local decision-making and relationships are crucial, analysts say. These states are economically diverse, with remote micro-economies best suited to local banks.
The model also appeals to potential sellers, and may help Glacier retain employees after mergers, said Jacquelynne Chimera, a Keefe, Bruyette & Woods analyst. She said she wouldn't be surprised if the bank picks Blodnick's successor from one of its local management teams.
"People like to be acquired by Glacier. They have an excellent reputation for being good at transitions and knowing what they're doing," she said.
Blodnick takes pride in Glacier's relationships with its various management teams, and its reputation as a responsible buyer.
"You're always going have your bumps, and every transaction has its own set of nuances, but at the end of the day, I think that most of these banks truly feel part of the family," he said.
Glacier's model does take more effort to operate, however. For many years, each Glacier franchise had a separate board of directors, and Blodnick would attend every board meeting by driving from bank to bank, across Montana, Wyoming, Idaho and Utah.
"I put in a lot of windshield time," he said. Some years he'd put 90,000 miles on his car.
That changed in 2012, when, in response to growing compliance costs, Glacier merged its 11 charters into one. The idea was to keep the advantages of the multibank model, like local management and separate brands, but reduce the compliance burden.
Now, instead of 11 bank exams, Glacier has one. "My only regret is that we should have done it sooner," Blodnick said.
Blodnick's explanation for why he's preparing to retire now, while still fairly young, is typical of his cautious approach to management. The transition may take a few years, so better to start early than when he's 64 or 65. (A new CEO will be named next year.)
He has no concrete plans for what he'll do in retirement. He has dedicated a lot to Glacier, and now he wants to spend time with his family, he said.
"I understand that I gave up a lot over the years. My wife was the one with the kids when I was traveling on the road," he said. "To be quite honest, I just want to spend more time with her."
They may do some traveling throughout the U.S., and maybe he'll take up a hobby (though it won't be golf, he insists). His years at Glacier have been "awful gratifying," he said.
"When you break it down, this is a pretty simple industry," he said. "If you don't get too full of yourself, and just think about what you're trying to do to help people better their lives, it can be a very, very rewarding career."